Colleges’ Pursuit of Prestige and Revenue Is Hurting Low-Income Students

Sept. 16, 2014

Fifty years ago, the federal government committed itself to removing the financial barriers that prevent low-income students from enrolling in and completing college. For years, colleges complemented the government’s efforts by using their financial aid resources to open their doors to the neediest students. But a new report from New America suggests those days are in the past, with an increasing number of colleges using their financial resources to fiercely compete for the students they most desire: the "best and brightest" -- and the wealthiest.

Along with the report, we're releasing an interactive web application, presenting the data used in the report on 1,400 private and public colleges across the United States.

The report, Undermining Pell: Volume II, assesses institutions using two metrics: the proportion of undergraduate students on a campus that have Pell Grants, and an institution’s “net price” -- the average amount paid after grant and scholarship aid is deducted from a college’s list price -- for students with family incomes less than $30,000. The paper reviews new U.S. Department of Education data on more than 1,400 four-year colleges for the 2011-12 academic year – updating last year’s report, which provided a snapshot of 2010-11 data. Data are depicted on 3-by-3 color grids, the outermost corners of which show four discernable ‘types’ of colleges. The top-left green block, for instance, shows institutions that offer the most places to low-income students at the lowest prices (an interactive version of the grid is displayed above).

The news is that things are getting worse. At private nonprofit institutions:

The proportion of colleges charging low-income students an average net price under $10,000 has dropped in one year from 11 to 8 percent of schools. The proportion charging the same students a net price over $20,000 has increased from 22 to 26 percent of schools.

The number of colleges at which Pell recipients make up more than 15 percent of the student body and the lowest-income students are charged a net price under $10,000 has dropped from 33 to 23 in one year.

95 percent colleges examined in the report charge low-income students an average net price of more than $10,000; seven in 10 charge more than $15,000.

Average net prices for low-income students rose above $10,000 at 19 colleges, but dropped below $10,000 at only seven colleges.

At public colleges, our findings are mixed:

The proportion of institutions that charged in-state low-income students more than $10,000 has grown from 34 percent to 45 percent of schools examined in one year. The proportion of institutions with net prices for low-income students above $15,000 increased from 5 to 7 percent.

About half of public four-year colleges enroll at least 30 percent low-income students and charge them less than $10,000.

Average net prices at 63 public colleges rose above $10,000 in the space of one year, but dropped at only 14 colleges in the same time period.

Many public colleges that have the means to enroll a significant share of Pell Grant recipients and charge them a low net price choose not to do so.

The report notes that some private colleges, like Vassar in Poughkeepsie, NY, are making extraordinary efforts to recruit, enroll, and financially assist low-income students. But they are few and far between. Many private colleges have small endowments, making it extremely difficult for them to provide adequate support to those students with the greatest need. Indeed, it is often the poorest schools that enroll the largest proportion of federal Pell Grant recipients and charge these students high net prices because of their own limited resources. At the same time, many of these institutions provide deep tuition discounts to wealthier students because they believe it is necessary for their survival.

On the other hand, many prosperous private colleges are also stingy with need-based aid. These institutions, like Baylor University in Waco, TX and Northeastern University in Boston, MA, tend to use their institutional financial aid to reel in the top students, as well as the most affluent, to help them climb up the U.S. News & World Report rankings and maximize their revenue.

While the problem is not as extreme among public colleges and universities, it is rapidly escalating. State disinvestment and institutional status-seeking are working hand in hand to encourage an increasing number of public institutions to adopt the enrollment tactics of their private-college counterparts – often to the detriment of the low-income students they enroll. In fact, nearly two of every five public four-year colleges now leave the most financially needy students on the hook for more than $10,000 per year.

Oregon State University, for example, is on a mission to become a top 10 land-grant institution, with the university making financing merit scholarships one of its leading priorities. With all the money Oregon State spends recruiting the best and the brightest, the university appears to have little left over for those with the greatest financial need. While Pell Grant recipients make up 34 percent of the school’s student body, the lowest-income Oregon students pay an average net price of about $13,500.